- China’s move to allow more companies to import gold into the country from next month will likely bring down the premium over international prices that domestic buyers there have traditionally paid, Albert Cheng, managing director of World Gold Council’s Far East office said Thursday.
China currently allows only 15 banks to import gold, but effective from April 1 domestic miners that have assets overseas will be allowed to bring the precious metal directly into the country.
“There will be more competition and that will drive down premiums,” Mr. Cheng told The Wall Street Journal in an interview.
Though China’s central bank has announced the rule changes, final guidelines are likely to be issued on April 1.
In the past, Chinese gold buyers have often had to pay a high premium if they want speedy delivery of the precious metal. During periods of peak buying, the premium often shoots above $10 an ounce over the international rates.
With more entities able to import gold, there should be more gold supply within China, bringing down those premiums.
Gold was trading at $1,201 an ounce Thursday.
Mr. Cheng estimated the new rules would result in at least four domestic miners applying for import licenses.
He added that he wasn't expecting a spurt in China’s gold imports as a result of the new rules, although imports this year could still rise by nearly 11% to 900 metric tons, after stockpiles built up in 2013 were unwound last year.
While China and India together account for more than half of global demand for gold, Mr. Cheng said other Asian countries like Myanmar and Indonesia could be important sources of growth in gold demand, as economic reforms are likely to spawn wealthier individuals.
Asia’s share of global gold demand is expected to rise to between 65%-70% from the current level of 60% over the next three years, as the precious metal has always been popular as a store of wealth in the region, he said.
A recent move to launch gold trading contracts in Shanghai, Singapore and Hong Kong with the aim of direct delivery of physical gold to customers in the region was bound to facilitate purchases in the region, which are now made through London or New York, Mr. Cheng said.